Spooky Economy

Knowledge Dispels Fear

Former U.S. Department of Housing and Urban Development (HUD) Commissioner

Concern: Loss of Civil Liberties by Corporate Fraud and Capture of Government

https://secure.wikimedia.org/wikipedia/en/wiki/Catherine_Austin_Fitts

When plunder becomes a way of life for a group of men living together in society, they create for themselves, in the course of time, a legal system that authorizes it and a moral code that glorifies it.,— Frederic Bastiat

Introduction

In 1989, Catherine Austin Fitts served as HUD Commissioner with the Bush administration [1][4]. She was responsible for 7,000 employees in 80 offices and hundreds of billions of dollars in mortgages and insurance. [2]

Prior to this, Fitts worked as an investment banker with Dillon, Read & Co. [2][4] In 1991, Fitts was offered a position as Governor of the Federal Reserve [20@p18][32] and offered sponsorship to the Council of Foreign Affairs [3@s11] both of which she declined. White House Chief of Staff John Sununu appointed her to the board of Sallie Mae, the corporation that helps provide financing for student loans. [3@s11]

Fitts left HUD to form her own company, Hamiton Securities Group, which served as lead financial advisor to the Federal Housing Administration between 1994 and 1997. [25]

Current Economic Crisis

Warning: The information presented here is challenging and may disturb some readers. We welcome scholarly information that supports or refutes Fitts' assertions.

Fitts' work as a Wall Street banker and HUD Commissioner gave her a view into the inner workings of the organizations and led her to discover a world of relationships and processes that are disturbing and uncomfortable to believe.

In 1993, Fitts' investment company, Hamilton Securities, developed software that brought together information about a city or county in ways that weren't possible before. It was unique because it showed how Federal money flowed in and through a community. [3@s11][5@8:38][9@14:21][26]

Her problems began when the software exposed and documented fraud. It showed things such as government mortgage insurance payments for housing that did not exist [5@34:35], and multi-million dollar payments for flood insurance for a hilltop community [3@s11] [20@p18]. Even more sinister were clues on how some of the mortgage fraud tied in with narcotics trafficking [32].

Fitts saw this as an opportunity to save taxpayer money while making money for her own company [9@46:11][20@pg20]. At first, government department heads and private groups shared her excitement. [3@s11] But soon afterward, there was a powerful "push back".

In working to understand the resistance, Fitts says she learned that a powerful network of incestuous relationships existed in the nation's capitol that supports the making of money by continuing failure rather than correcting it. [3@s11] [20@p23] For example, organizations that are in charge of controlling poverty fight against any attempts at eliminating it. Their departments would get scaled back or closed. [3@s11]. Others pushed for the building of expensive, new public housing since it is more profitable than refurbishing existing, foreclosed properties. [20@p13][20@p18][37@3:07]

According to Fitts, the problems did not end there. As she dug deeper, she uncovered what she believes is, at it's core, a financial network that is criminal and alien to the sensibilities of most Americans. She gives an account of her behind-the-scenes experiences in a series of essays [3][20][28] that provide the names of corporations, businessmen, government officials, photos and signed official letters. She includes references to pending lawsuits and decided court cases. [27]

Fitts believes that powerful, global[17] business interests are competing in a way that will effectively liquidate the wealth of the American middle class while consolidating their own wealth and power. [14] This is happening with what she calls a "tapeworm economy" [9@7:03], an economy that has evolved into one that subtley and continually draws wealth out from individuals and their communities [19][29]. People become accustomed to it as normal. [20@p14 (sidebar)] The smaller players who had benefited in the past will no longer be allowed to share in the returns as those returns become smaller. [9@48:16]

Fitts asserts that the U.S. Government is riven by powerful corporations [20@p22] influencing everything from the economy [9@7:28], military defense [citation], food stamp distribution [37@6:08], prison systems [3@s16] and the media [9@8:01], a concern expressed by Presidents Dwight Eisenhower [10@0:00], John F. Kennedy [10@1:21], Congressman Ron Paul [10@2:22] and former U.S. Comptroller David M. Walker [12] (on the healthcare industrial complex). This is aided by news organizations that are owned by the corporate interests, and their control of content to ensure there is no conflict with their corporate lobbying efforts [37@2:37].

Small businesses suffer from the loss of their markets to franchises and large corporations [9@16:17] and increasingly costly regulations that only large businesses can afford. [citation]

The following are brief synopsis of some of her other findings.

Massive Debt: Fitts states that, since the the birth of the United States until approximately 18 months ago, all the debt ever issued added up to $12 trillion. This includes debt issued for the Civil War, WWI, WWII, the Korean war, The Vietnam war, the building of the freeway systems, the space program, etc. Then, with the current crisis, an equivalent amount of $12 trillion was given to the banks. This amounted to a "leveraged take-over" of the country – a "financial coup d'etat". [9@9:07] [14]

401K and IRA Accounts: With the increasing cost of maintaining Social Security and other obligations, Fitts expresses concern that it may become politically possible to take over private retirement accounts and convert them into annuities. This will free the money for other uses while giving the account holder a fixed income and no inheritable assets. [7@24:34]

Globalization: While it is said that moving of jobs to other countries is for efficiency, Fitts doesn't believe this is always the case. Some moves allow the transfer of money in ways that could result in a change of ownership of that money. [9@25:08]

Mortgage meltdown: In the 1990s, the financial industry knew that American wealth was being transferred overseas along with American manufacturing jobs. In spite of this, the industry continued to sell mortgages knowing that, statistically, homeowners would be having difficulties in the future. Fitts believes that withholding this information from the mortgage applicant was a "material ommission" and that a legal case might be made for "fradulent inducement". Since fraudulent contacts cannot be enforced, Fitts says it could be argued that this could potentially invalidate all mortgages made after 1997. [9@16:40][33] She does not, however, believe that such legal action is practical since most of the mortgages have been packaged and placed in pension and retirement plans. [citation]

The "Slow Burn": While there are individuals who believe the U.S. economy will “crash”, Fitts believes that powerful financial interests are working to keep it running as it is - in a slow, "managed" decline. This provides additional time for the interests to centralize and consolidate their power. [30]

The Missing $4 Trillion Dollars: Fitts believes that over four trillion dollars vanished in the period between 1998 and 2002. And since 1995, the nation has produced no audited financial statements as required by law and no accounting has been made of the missing money. [31][5@11:46][5@9:43][5@22:55][18][6][14]

The Black Budget: Under the laws of the Constitution, money cannot be spent unless it is appropriated. It is a violation of the Constitution to do so. There are provisions, however, under the National Security Act of 1947 and the CIA Act of 1949 for military and military intelligence agencies to pull money from other government agencies’ budgets and spend it secretly. Fitts argues that this constitutes the “black budget” where vast unreported sums have "disappeared" and remain unaccounted for. [5@12:28]

Centralization and Consolidation: The movement in Washington today is towards consolidating political and economic power. Fitts believes that the solution is decentralization through use of the Internet. The 3,100 counties in the U.S. should work toward great automony and self-sufficiency. She states that she saw the potential from the results that her software had given. In many ways, much of the money is sent out of the community with little of it returning. [9@1:22]

Efforts to Help

In spite of this dark understanding, Fitts believes that ordinary people have the ability to strengthen themselves and their communities against negative efforts. She believes that there are still investment opportunities in building healthy communities as a good, self-reinforcing solutions. [13][26]

Today, she gives seminars [16] and radio interviews with the goal of educating people on how they can escape the tapeworm economy and participate in "the real economy", the economy beneficial to everyone.

Through her blog [10], she counsels one to live their life in ways that resist unhealthy “trends” that are being encouraged while working toward local self-sufficiency for their families, friends and communities. By building a network of strong communities and local governments, the country's citizenry can reassert it's authority over it's affairs and resources, and displace external financial interferences that take away rather than contribute to the solution.

Her blog also advises of news articles on positive and negative developments such as changes in important laws and also provides a background for understanding what is happening.

Quotes

"We're watching the end of sovereign governments and the rise of corporations. We're literally changing the governance structure on planet Earth so that we're no longer governed by countries that coordinate with each other. We are literally governed by private corporations." [9@12:07]

"We are watching liabilities [debt] being shifted into sovereign governments and assets [wealth] being shifted to corporations." [9@12:25]

“We are watching a process of both centralization and consolidation worldwide.” [31][citation]

“If you look deeply into how government policy... are being driven, a lot of this capital has been shifted, I believe, in criminal ways... Between fiscal 1998 and fiscal 2001 there are four trillion dollars missing from the Federal government.” [citation]

“I had been in a meeting with a group of pension fund leaders and I had presented them with my vision of how we could really radically increase productivity in the United States and do it in a way that would make money for the pension funds... The head of CalPERS looked at me and said, 'You don't understand, it's too late. They've given up on the country. They're moving all their money out starting in the fall [of 1996]' And I thought he meant they were moving all the money that could legitimately, legally be moved. And that's when 4 trillion dollars started to go missing.” [3@s16][9@37:19][37@7:00]

"I came back to Washington, D.C feeling that the world had indeed gone mad. Everywhere I turned I saw people who seemed quite happy to make money doing things that drained and liquidated our permanent infrastructure and productivity as a people and a nation." [3@s16]

"The minute we say... 'we're all going to make money on things that have a total positive return [also good for communities]... the whole thing turns around." [9@43:44]

"We're making up with force what we don't need force to do [instead of] what trust can do, if people can trust each other. But that requires that the insiders respected the same laws that they require of everybody else." [9@45:24]

"People in New Zealand and Mexico will describe the fact that they can buy lots of... pharmaceutical drugs for 10 cents on the dollar... Clearly, government is using their governmental authority to force profits into the phamarceutical cartel within the tapework." [9@49:45]

When Fitts approached an assistant HUD project director on a potential savings, they responded "But how will we generate fees for our friends?" [37@3:07][11@30:58]

Personal Concerns

When certain parties realized that Fitts' software had the potential for affecting the customary money flows, Fitts and her firm, Hamilton Securities, were targeted as the defendents in a whistleblower lawsuit [23][27][9@15:49][9@34:51]. Efforts were made to frame her [3@s13] by falsifying obstruction of justice charges [3@s16][9@39:17][32]. She was subjected to nightmarish covert operations aimed at intimidating her, her friends and her staff. [26] Her software was destroyed [26] and her legal defense and subsequent lawsuit for damages destroyed her personal wealth [3@s13][24]

At one point, Fitts was told directly: "the big boys have gotten together and [decided] you are going to prison". When she responded "It'll never work, Scott. We are too clean", she was told "You don't get it. The fix is in. There is nothing you can do." [3@s13]

The eight-year, multi-million whistleblower lawsuit was dismissed for lack of evidence in 2003. [24] Fitts and her defunct company were vindicated in 2004 when the U.S. Court of Federal Claims awarded her the $2.5 million owed by HUD. [24]

Proposed Solutions

Fitts offers many recommendations for individuals, communities and the national government on how to address the issues she outlines. Below are just a few: